Venture Capital Investment Criteria

Venture capital is one of the most suitable sources of capital for business growth and expansion but most small and medium enterprises (SMEs) in emerging economies fail to meet the criteria required to access this source of capital. This is because venture capitalists evaluate SMEs in emerging economies using conventional investment criteria that do not take into consideration the institutional limitations of developing countries in general, and SMEs in particular. Thus, venture capitalists find SMEs to be ill-prepared for investment and view them as risky and costly. This book analyses the conventional venture capital investment criteria and highlights their limitations in a developing country context, identifies SME equity success factors, and develops hypotheses, which are empirically tested among venture capital investors and SMEs in South Africa. It provides an alternative set of venture capital investment criteria and a deeper understanding of SME equity financing. This book has important policy implications for private equity and venture capital investors, financial institutions, entrepreneurs, and anyone with a policy or research interest in advancing entreneurship.